FAS: lack of rolling stock in commuter carriage is a direct responsibility of “Russian Railways”

FAS drafted new Guidelines for determining a lease fee for rolling stock of “Russian Railways” set for commuter passenger companies. In the near future it will be placed on www.regulation.gov.ru for public discussions.

The report was made by an advisor to Head of FAS Pavel Shpilevoi at the workshop “Tariff Regulation in 2017 and regulators’ objectives for 2018 – 2025” in Crimea on 18 October 2017.

According to Pavel Shpilevoi, the tariff system is not perfect and the Guidelines for determining lease rates for rolling stock of “Russian Railways” for commuter routes, devised by Russian Federal Tariff Service a while ago, did not bring in any clarity.

An analysis of the lease ratesfor commuter rolling stock, carried out by FAS jointly with “Russian Railways” in the past five months showed that the rates are different for different regions.  For the same train models, the rates vary for capital repair and maintenance in spite of the same service offered by the same organization in different regions.

Pavel Shpilevoi pointed out that the rates are based on the costs method. “Russian Railways” includes the depot costs for rolling stock care and maintenance as well as general economic expenses in the commuter rolling stock fees. There are 6 levels of overheads allocated across the lease fees of “Russian Railways”.
“Currently the rolling stock of “Russian Railways” is insufficiently modernized. We think that renewing the rolling stock is a responsibility of “Russian Railways”, and the company should undertake obligations on its modernization” stated Pavel Shpilevoi.

FAS thinks that “Russian Railways” cannot and should not distance from modernizing the rolling stock. A new approach to determining the rates should answer the question: how to invest in modernizing the rolling stock.

According to Pavel Shpilevoi, the existing system of the rolling stock lease rates has no room for investment programmes. The new, FAS-drafted Guidelines for determining lease rates of “Russian Railways” for commuter passenger companies breaks down the lease rates into five elements.

In particular, the rates include the fee for offering cars for a year and if a region wishes to add the traffic frequency on commuter routes it will not generate additional costs from the regional budget.

Another element is management and operation (the work of locomotive crews). Here FAS proposes to consider direct costs for labour and general depot business overheads. Overheads at other management level can be accounted for in other types of activities.  In FAS view, the rolling stock lease rates may drop by 10-20%.

In the near future the antimonopoly body will publish the lease rates of “Russian Railways” by series and started discussing them with “Russian Railways” and at the Government. It is expected that the rates for maintenance, capital and minor repair will go down by 20%.

FAS also proposes to give commuter train companies the right to order current repair services from both “Russian Railways” and other companies. Today only “Russian Railways” may offer such services and FAS objective is to develop competition in this sector.

The antimonopoly body also proposes to use the savings from changed lease rates to modernize the rolling stock by regions.

FAS believes that “Russian Railways” should calculate the balance of the rolling stock fleet by regions and ensures its modernization. An additional financing source for commuter rolling stock may be procurement savings by “Russian Railways”  under No. 643 draft Decree submitted by FAS to the Government.